According to the SEC, from approximately 2008 to 2014, NSR caused the NSR Funds to invest over $250 million in four portfolio companies in which an NSR Affiliate Fund also invested. The SEC alleged that NSR’s co-founder and chief executive officer was a co-founder and chief executive officer of a separate Advisers Act-registered investment adviser, which managed other private equity funds (each, an “NSR Affiliate Fund”). (“NSR”), an investment adviser registered under the Advisers Act, for allegedly failing to obtain advisory board consent for certain co-investments made by two private equity funds managed by NSR (the “NSR Funds”), as required by each NSR Fund’s limited partnership agreement.Īccording to the SEC, each NSR Fund’s limited partnership agreement required NSR to obtain the consent of the Fund’s advisory board before making any investments in portfolio companies in which NSR or its affiliates were also investing or had invested. 14, 2016), the SEC settled public administrative and cease-and-desist proceedings against New Silk Route Advisors, L.P. In New Silk Route Advisors, L.P., Advisers Act Release No. In a 2016 speech, the SEC’s Chair acknowledged the priority the Commission has placed on establishing individual liability.Īlleged Failure by Private Equity Fund Manager to Obtain Advisory Board Consent for Co-Investments Presenting Conflicts of Interest ![]() ![]() The Commission, in what seems to be an ever increasing number of these actions, appears to have focused on obtaining acknowledgements of wrongdoing by individuals as part of settlement agreements. These actions targeted diverse areas including: investment advisers’ compliance programs investment advisers’ fiduciary duties alleged misappropriation of client assets, misallocation of expenses, fraudulent investment performance track records, misvalued portfolio assets, violations of cybersecurity requirements, non-disclosure of conflicts of interest violations of best execution obligations and engaging in other activities deemed by the SEC to be fraudulent within the meaning of the Investment Advisers Act of 1940. The Securities and Exchange Commission (“SEC” or “Commission”) continues to take an aggressive enforcement stance with respect to the asset management industry, filing 807 enforcement actions in 2015 and 868 enforcement actions in 2016 against investment advisers and investment companies over the last two years.
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